Federal Register / Vol. 72, No. 71 / Friday, April 13, 2007 / Notices 18701 

10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(6). 

5 ISE notes that this proposed rule change will 

enable Sponsored Customers of Members to access 

both its Options Exchange, as per Rule 706, and its 

Stock Exchange, as per Rule 2100, which 

incorporates Rule 706 by cross-reference. 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–CHX–2007–14 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE, Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–CHX–2007–14. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of the filing also will be 

available for inspection and copying at 

the principal office of CHX. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–CHX–2007–14 and should 

be submitted on or before May 4, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–6963 Filed 4–12–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55586; File No. SR–ISE–

2007–19] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to Access to the 

Exchange by Sponsored Customers 

April 5, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 13, 

2007, the International Securities 

Exchange, LLC (‘‘ISE’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been substantially prepared by ISE. The 

Exchange has filed the proposal as a 

‘‘non-controversial’’ rule change 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(6) thereunder,4

which renders it effective upon filing 

with the Commission. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

ISE proposes to amend ISE Rule 706 

to permit Sponsored Customers of a 

Member to access the Exchange. The 

text of the proposed rule change is 

available at ISE, the Commission’s 

Public Reference Room, and 

www.iseoptions.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, ISE 

included statements concerning the 

purpose of and basis for the proposed 

rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. ISE has prepared 

summaries, set forth in Sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

This proposed rule change seeks to 

permit Sponsored Customers of 

Members to access the Exchange 

provided that a Sponsored Customer 

Agreement has been entered into with 

the Exchange by the Sponsored 

Customer, and provided certain other 

conditions are satisfied. The proposed 

revisions to Rule 706 outlines the 

requirements that Sponsoring Members 

and Sponsored Customers would be 

required to meet prior to engaging in a 

Sponsoring Member/Sponsored 

Customer relationship.5

A ‘‘Sponsored Customer’’ is a nonMember of the Exchange, such as an 

institutional investor, that trades under 

a Sponsoring Member’s execution and 

clearing identity pursuant to a 

sponsorship arrangement between such 

non-Member and a Member. The 

Sponsoring Member must have 

documentation acknowledging it has 

full and complete responsibility for all 

trading activity conducted by its 

Sponsored Customer. A Sponsoring 

Member that provides access to a 

Sponsored Customer also has a 

continuing obligation to comply with all 

ISE rules and procedures and the federal 

securities laws and regulations. A 

Sponsoring Member must also continue 

to satisfy any agency obligations that 

may exist between itself and its 

Sponsored Customer. 

A Sponsored Customer’s access to the 

Exchange is conditioned on the 

following requirements being met: 

Sponsored Customers would be 

required to enter into a sponsorship 

arrangement with a ‘‘Sponsoring 

Member,’’ which is defined as an ISE 

Member that has been designated by a 

Sponsored Customer to execute, clear 

and settle transactions on ISE. The 

sponsorship arrangement consists of 

three separate components. 

First, the Sponsored Customer would 

have to enter into and maintain a 

customer agreement with its Sponsoring 

Member, establishing a proper 

relationship and account through which 

the Sponsored Customer would be 

permitted to trade on ISE. 

Second, the Sponsored Customer and 

its Sponsoring Member would have to 

enter into a written agreement that 


pwalker on PROD1PC71 with NOTICES
18702 Federal Register / Vol. 72, No. 71 / Friday, April 13, 2007 / Notices 

6See proposed ISE Rule 706, Supplementary 

Material .01(b)(2)(iv). 

7 15 U.S.C. 78f. 

8 15 U.S.C. 78f(b)(5). 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(6). 

11 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule 

19b–4(f)(6)(iii) requires that a self-regulatory 

organization submit to the Commission written 

notice of its intent to file the proposed rule change, 

along with a brief description and text of the 

proposed rule change, at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Commission has decided to waive 

the five-day pre-filing notice requirement. 

12 Id. 

13The Commission notes that proposed ISE Rule 

706, Supplementary Material .01 is substantially 

similar to NYSE Arca, Inc. Rule 7.29. 

14For the purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

incorporates the following Sponsorship 

Provisions: 

(1) The Sponsoring Member 

acknowledges and agrees that: (i) All 

orders entered by its Sponsored 

Customer and any person acting on 

behalf of or in the name of such 

Sponsored Customer and any 

executions occurring as a result of such 

orders are binding in all respects on the 

Sponsoring Member; and (ii) the 

Sponsoring Member is responsible for 

any and all actions taken by such 

Sponsored Customer and any person 

acting on behalf of or in the name of 

such Sponsored Customer. 

(2) The Sponsored Customer agrees 

that it would comply with the ISE 

Certificate of Formation, Constitution, 

Rules and procedures with regard to its 

activity on the Exchange as if the 

Sponsored Customer were an ISE 

Member. 

(3) The Sponsored Customer agrees 

that it would maintain, keep current and 

provide to the Sponsoring Member a list 

of its Authorized Traders 6 who would 

be permitted to obtain access to the 

Exchange on behalf of the Sponsored 

Customer(s). 

(4) The Sponsored Customer agrees 

that it would familiarize its Authorized 

Traders with all of the Sponsored 

Customer’s obligations under ISE Rules 

and would assure that they receive 

appropriate training prior to any use of 

or access to the Exchange. 

(5) The Sponsored Customer agrees 

that it would not permit anyone other 

than Authorized Traders to use or 

obtain access to the Exchange. 

(6) The Sponsored Customer agrees 

that it would take reasonable security 

precautions to prevent unauthorized use 

or access to the Exchange, including 

unauthorized entry of information into 

the System, or the information and data 

made available therein. The Sponsored 

Customer understands and agrees that it 

is responsible for any and all orders, 

trades and other messages and 

instructions entered, transmitted or 

received under identifiers, passwords 

and security codes of Authorized 

Traders, and for the trading and other 

consequences thereof. 

(7) The Sponsored Customer 

acknowledges its responsibility for 

establishing adequate procedures and 

controls that permit it to effectively 

monitor its employees, agents and 

customers’ use of and access to the 

Exchange for compliance with the terms 

of the Sponsorship Provisions. 

(8) The Sponsored Customer agrees 

that it would pay when due all amounts, 

if any, payable to the Sponsoring 

Member, ISE or any other third parties 

that arise from the Sponsored 

Customer’s access to and use of the 

Exchange. Such amounts would 

include, but would not be limited to, 

applicable exchange and regulatory fees. 

Third, the Sponsoring Member would 

have to provide ISE with an express 

acknowledgement of the Sponsoring 

Member’s responsibility for the orders, 

executions and actions of its Sponsored 

Customer. 

As a further condition to access to the 

Exchange, each Member would be 

required to maintain an up-to-date list 

of persons who could obtain access to 

the Exchange on behalf of the 

Sponsoring Member or the Sponsoring 

Member’s Sponsored Customers, i.e., 

Authorized Traders, and provide the list 

to ISE upon request. In addition, each 

Member would have to have reasonable 

procedures to ensure that all of its 

Authorized Traders maintain the 

physical security of ISE and otherwise 

comply with ISE Rules. If ISE 

determines that an Authorized Trader 

has caused a Member to violate ISE 

Rules, ISE could direct the Member to 

suspend or withdraw the person’s status 

as an Authorized Trader. 

The Sponsoring Member/Sponsored 

Customer relationship would allow a 

Member to grant access to ISE to their 

customers while confirming that those 

customers who do have access to ISE 

have appropriate procedures in place to 

comply with ISE rules. Furthermore, the 

identity of all individuals with access 

(i.e., Authorized Traders) would have to 

be disclosed to the Exchange, giving the 

Exchange better information in the 

event that the Exchange determines to 

take action because its systems have 

been used inappropriately. 

2. Statutory Basis 

ISE believes that the proposed rule 

change is consistent with the provisions 

of Section 6 of the Act,7 in general, and 

with Section 6(b)(5) of the Act,8 in 

particular, in that the proposal is 

designed to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

ISE does not believe that the proposed 

rule change will result in any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the forgoing rule change does 

not: (1) Significantly affect the 

protection of investors or the public 

interest; (2) impose any significant 

burden on competition; and (3) become 

operative for 30 days after the date of 

this filing, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 9 and Rule 19b–

4(f)(6) thereunder.10

A proposed rule change filed under 

19b–4(f)(6) normally may not become 

operative prior to 30 days after the date 

of filing.11 However, Rule 19b–

4(f)(6)(iii) 12 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange has requested that the 

Commission waive the 30-day operative 

delay. The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest 

because such waiver would permit ISE 

Members to immediately provide its 

Sponsored Customers access to ISE’s 

markets.13 For this reason, the 

Commission designates the proposed 

rule change to be operative upon filing 

with the Commission.14

At any time within 60 days of the 

filing of such proposed rule change the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 


pwalker on PROD1PC71 with NOTICES
Federal Register / Vol. 72, No. 71 / Friday, April 13, 2007 / Notices 18703 

15 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Amendment No. 1 makes clarifying changes to 

the rule text emphasizing that attorneys may 

represent parties in NASD’s forum, unless state law 

prohibits such representation. Amendment No. 1 

also makes several clarifying and technical changes 

to the proposed rule filing. 

4Amendment No. 2 makes clarifying changes to 

the rule text concerning restrictions on non-attorney 

representation. Amendment No. 2 also includes 

minor organizational changes to a paragraph and 

footnotes describing the American Bar Association 

Model Rule of Professional Conduct 5.5. 

5The proposed rule change contemplates changes 

to Rules 12208 and 13208 of the Customer and 

Industry Codes, which restate old Rule 10316. See 

Securities Exchange Act Release No. 55158 (Jan. 24, 

2007); 72 FR 4574 (Jan. 31, 2007) (File Nos. SR–

NASD–2003–158 and SR–NASD–2004–011) (Order 

Approving Proposed Rule Change and Amendments 

1, 2, 3, and 4 to Amend NASD Arbitration Rules 

for Customer Disputes and Notice of Filing and 

Order Granting Accelerated Approval of 

Amendments 5, 6, and 7 Thereto; Order Approving 

Proposed Rule Change and Amendments 1, 2, 3, 

and 4 to Amend NASD Arbitration Rules for 

Industry Disputes and Notice of Filing and Order 

Granting Accelerated Approval of Amendments 5, 

6, and 7 Thereto). The changes to Proposed Rule 

10407 reflect changes to the new NASD Code of 

Mediation Procedure. See Securities Exchange Act 

Rel. No. 52705 (Oct. 31, 2005); 70 FR 67525 (Nov. 

7, 2005) (SR–NASD–2004–013). The new NASD 

Code of Mediation Procedure is currently included 

in the Code, but will be removed and renumbered 

as a separate Code now that the Customer and 

Industry Codes have been approved. 

necessary or appropriate in the public 

interest, for the protection of investors 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–ISE–2007–19 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE, Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–ISE–2007–19. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of the filing also will be 

available for inspection and copying at 

the principal office of ISE. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–ISE–2007–19 and should be 

submitted on or before May 4, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–6961 Filed 4–12–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55604; File No. SR–NASD–

2006–109] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing of 

Proposed Rule Change and 

Amendment Nos. 1 and 2 Thereto 

Relating to Representation of Parties 

in Arbitration and Mediation 

April 9, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that the National 

Association of Securities Dealers, Inc. 

(‘‘NASD’’), through its wholly owned 

subsidiary, NASD Dispute Resolution, 

Inc. (‘‘NASD Dispute Resolution’’) filed 

with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

on September 14, 2006, and amended 

on November 9, 2006 (Amendment No. 

1) 3 and February 23, 2007 (Amendment 

No. 2),4 the proposed rule change as 

described in Items I, II, and III below, 

which Items have been prepared by 

NASD Dispute Resolution. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change, as amended, from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NASD Dispute Resolution is 

proposing to amend the Code of 

Arbitration Procedure for Customer 

Disputes (‘‘Customer Code’’), the Code 

of Arbitration Procedure for Industry 

Disputes (‘‘Industry Code’’), and the 

NASD Code of Arbitration Procedure 

(‘‘Code’’) to address representation of 

parties in arbitration and mediation.5

Below is the text of the proposed rule 

change. Proposed new language is in 

italics; proposed deletions are in 

brackets. 

* * * * * 

Customer Code 

12208. Representation of Parties 

(a) Representation by a Party 

Parties may represent themselves in 

an arbitration held in a United States 

hearing location. A member of a 

partnership may represent the 

partnership; and a bona fide officer of 

a corporation, trust, or association may 

represent the corporation, trust, or 

association. 

(b) Representation by an Attorney 

At any stage of an arbitration 

proceeding held in a United States 

hearing location, [All] all parties shall 

have the right to be represented by 

[counsel during any stage of an 

arbitration] an attorney at law in good 

standing and admitted to practice 

before the Supreme Court of the United 

States or the highest court of any state 

of the United States, the District of 

Columbia, or any commonwealth, 

territory, or possession of the United 

States, unless state law prohibits such 

representation. 

(c) Representation by Others 

Parties may be represented in an 

arbitration by a person who is not an 

attorney, unless: 

• state law prohibits such 

representation, or 

• the person is currently suspended 

or barred from the securities industry in 

any capacity, or 

• the person is currently suspended 

from the practice of law or disbarred. 


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